Monday, June 4, 2007

Malpractice Carrier Liable for Partner's Actions After Leaving an Insured Firm

Thanks to ambiguous and vague policy language, a professional liability carrier will have to cover a law firm partner for malpractice allegedly committed after he left an insured firm, a New Jersey appeals court says.

The judges ruled on May 25 that where a policy limited coverage for a firm's retired partners but not for partners who still practiced law and handled cases referred by the firm, the policy would be read against the carrier, Zurich Specialties London Limited.

"Zurich could have utilized policy language that would have eliminated all ambiguity and which would have put the matter beyond all reasonable question," the judges wrote in Jolley v. Marquess, A-4513-0. "Zurich did not do so; therefore, we construe the ambiguity in favor of coverage, which is the approach long favored in this state."

The judges noted, however, "Our own research, and that of the parties, yields no reported decisions in this state construing this policy language."

In 1997, John Marquess, a partner at what was then Marquess, Morrison and Trimble in Turnersville, N.J., represented defendant Barbara Gorna in an automobile accident case. The case was assigned by Gorna's insurer, American Independent Insurance Co., a client of the firm.

In 2000, Marquess was bought out by his two partners but, with their consent, continued to represent Gorna as a Haddonfield, N.J., solo. No substitution of attorney appears to have been filed.

The same year, a jury found Gorna 100 percent liable for the injuries to the plaintiff, Kimberly Jolley. Without Gorna's consent, Marquess entered into an agreement with Jolley's attorney that Gorna would pay Jolley $750,000, plus interest, in damages. Marquess told Gorna she would not be responsible for the judgment above her $15,000 coverage limit, but that was not stated in the agreement.

When the malpractice was discovered, Gorna and Jolley (as Gorna's subrogee) sued Marquess and AIIC with a four-count complaint that included legal malpractice. Zurich refused Marquess' demand for a defense and for indemnity, saying he was no longer a named insured, that the malpractice occurred after he left the firm, that he got the case directly from AIIC and that since AIIC directly paid him for work he did after leaving the firm, the remaining partners surrendered all responsibility for the case.

The dispute came before Mercer County Superior Court Mary Jacobson on a motion for summary judgment. She read the professional liability policy language liberally to find a duty to defend and to indemnify Marquess.

The policy provided coverage for "(c) any person who ... was, is now, or hereinafter becomes an employed lawyer or another employee of the firm or predecessor firms ... solely while acting in a professional capacity on behalf of such firm or firms" and "(d) any former partner, officer, director or stockholder employee of the firm or predecessor firms ... while acting solely in a professional capacity on behalf of such firms."

The policy limited coverage for retired partners to "those professional services rendered prior to the date of retirement from the Insured firm." However, it had no coverage limitation for partners who left the firm but continued to represent a client.

On appeal, Judge Linda Baxter, joined by Judges Michael Winkelstein and Jose Fuentes, said that although the relevant policy provisions were difficult to interpret, "we discern from that language an intention to limit coverage to those instances where a former associate or former partner is representing a party who remains a client of the insured firm, as opposed to a successor firm."

What matters, Baxter said, is how Marquess got the case transferred to him, not the billing arrangements with the client, AIIC. Baxter said that policy language, if liberally read, could lead to the belief that since Marquess's former partners asked him to try the case after he had already left, the file was still, in effect, the firm's and he should be indemnified.

Marquess's lawyer, Patrick Madden, says there is "nothing earth-shattering" about the Appellate Division's ruling, although he acknowledges it's the first time this policy language has been construed. "The opinion is consistent with other cases interpreting policies, with the intent being that there should be a presumption in favor of coverage if the language is ambiguous," says Madden, of Haddonfield's Madden & Madden.

Zurich's lawyer, Steven Polansky, of the Cherry Hill, N.J., office of Marshall, Dennehey, Warner, Coleman & Goggin, was away from his office on May 25, the day of the ruling, and could not be reached for comment.

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